After years of struggling against cash outflows and another year of weak business figures, the Swiss fund company GAM is losing its independence. The British Liontrust Asset Management will take it over. Liontrust is offering 107 million francs in its shares for GAM, the two companies said Thursday. GAM’s board of directors voted in favour of the transaction.
Chief Executive Peter Sanderson said it had been optimistic at the start of 2022 that it would reap the rewards of the company’s transformation and leave the past behind. But further declines in assets under management, and thus profitability, had led to the realization that more than restructuring was needed and that strategic options needed to be explored, he said.
GAM has been struggling with cash outflows for about five years. The company later became embroiled in the Greensill Bank scandal over the same, which collapsed in 2021.
At the beginning of 2018, GAM still had nearly 85 billion francs in assets under management. At the beginning of this year, it was down to around 23 billion. In the fund services business, volumes fell from 74 billion to 52 billion francs over the same period. At the same time, fund outflows in its own business of 2.6 billion francs last year were the lowest since the start of the crisis four years ago. In the service business, net outflows were just under 6 billion francs, of which 2.5 billion was attributable to the large client.
Net revenues fell 27 percent year-on-year to CHF 172 million in 2022, while the number of employees fell 11 percent to just 541 people. The loss increased from 15 million Swiss francs in the previous year to 266 million due to an almost complete write-off of the brand value resulting from the acquisition by Bank Julius Baer in 2005. Even without this write-down, the loss increased to nearly three times that amount. At Group level, liquidity shrank by 75 percent to just 4.9 million francs. On the positive side, 55 per cent of assets under management recorded above-average performance, but this is put into perspective in the context of the weak investment year. Clients have recently been talking more about the company than the products, David Jacobi, chairman of the board of directors, said in a conference call. Merging with Liontrust is the only option, Sanderson said. He said he was confident shareholders would accept it.
Together with GAM, Liontrust now has £53 billion in assets under management. While Liontrust is vital in the U.K., most of GAM’s clients are from continental Europe, he said. Liontrust is offering 0.0589 of its own shares per GAM share. This represents an offer price of 0.6723 francs per GAM share. On Wednesday evening, the shares had closed at 0.612 francs. At the beginning of 2018, the shares were still quoted at more than 18 francs.
The condition for the deal to go through is the tender of two-thirds of GAM shares. Just under one-fifth of the shareholders have already indicated that they will support the transaction. How the shareholder group around French billionaire Xavier Niel will react is still being determined. Niel’s NewGAMe and the Swiss asset manager Bruellan had only recently built up their position of around 7.5 percent. Liontrust had confirmed takeover negotiations with GAM in mid-April. The closing of the transaction was planned for the fourth quarter of 2023.